Analysts’ Ideas Of The Week
- Our prediction for the Bank of Canada’s meeting this week.
- Why did gold and silver prices trend higher last week?
- Oil major ExxonMobil (NYSE: XOM) is entering the lithium space.
- The U.S. SEC has launched a lawsuit against Binance and its CEO.
- Positive news from a student housing company under our coverage.
FRC Top Picks
The following table shows last week’s top five performers among our Top Picks, including five junior resource companies. The top performer FPX Nickel Corp. (TSXV: FPX), was up 34.9%, amid a $16M strategic equity financing from Outokumpu (HLSE: OUT1V/MCAP: US$2.5B/a global steel producer). Our prior reports can be viewed here.
Companies on our Top Picks list are up 13% on average since we initiated coverage vs -31% for the benchmark (TSXV).
1. Since the earliest initiating date of companies in the list of Top Picks (as of Jun 5, 2023)
2. Green (blue) indicates FRC’s picks outperformed (underperformed) the benchmark.
3. Past performance is not indicative of future performance.
Our complete list of top picks (updated weekly) can be viewed here.
Weekly Mining Commentary
Last week, global equity markets were up 0.4% on average (down 0.4% in the prior week). The S&P 500 was up 2% WoW, as the U.S. Senate approved a bill to raise the country’s debt ceiling, avoiding a federal default. We had predicted this scenario in our report last week.
Although inflation increased MoM in April, we believe the Bank of Canada will not raise the benchmark rate in its meeting this week, due to rising financial instability.
As we predicted, gold and silver prices trended higher amid a weaker US$. Zinc prices fell two weeks in a row, amid a steep rise in inventories.
Valuations of gold producers were up 2% last week (down 4% in the prior week); base metal producers were up 4% last week (down 3% in the prior week).
We are maintaining our metal price forecasts.
Key sector developments are listed below (positive):
– Per Bloomberg, the Democratic Republic of Congo (DRC) has replaced Peru has the second largest copper producer in the world, behind Chile. We view this as a positive development for miners/explorers operating in the DRC, as investor sentiment towards the country has been negative due to lack of transparency, security concerns, and political instability. Our reports on an advanced stage gold explorer in the DRC can be viewed here.
– Oil major ExxonMobil has entered the lithium space, by acquiring drilling rights for a lithium project in Arkansas. As mentioned in our previous reports, we are expecting majors to grow their lithium portfolios through M&A.
Updates from Resource Companies Under Coverage
Positive – Continues to return high nickel grades over long intervals (25.86 m of 1.17% Ni, 0.80% Cu, 0.08% Co, 1.46 pm Pd, and 0.23 ppm Pt), expanding mineralization by 75 m along depth, and 150 m along strike. A NI 43 101-compliant resource is expected in the next quarter.
Signs an option agreement with privately-held North Shore Energy Metals for the South Falcon uranium property in the Athabasca basin
Positive – Attracted a partner to advance one of its non-core properties. North Shore can acquire an initial 80% interest for cash/shares/exploration expenses totalling $5.3M.
Completes a nine-hole drill campaign at Rincon West (Argentina)
Positive – Every hole intersected attractive lithium grades. The ninth hole returned highly promising results, including 258 m of 287 to 402 mg/L. These results will be used for a maiden resource estimate.
Positive – Proceeds will be used to advance its projects in Sudbury and Nunavut.
Positive – Proceeds will be used to advance exploration at its two high-grade nickel prospects –Taylor Brook in Newfoundland and Florence Lake in Labrador.
Completes a high-resolution airborne survey at its Sill Lake lead-silver property in Ontario
Positive – The survey identified a northwest-southwest trending magnetic low, with potential for extending a historic resource estimate (112 Kt at 134 g/t Ag, 0.62% Pb, and 0.21% Zn) by 2 km.
Financial / Technology / Energy / Special Situations
Takes possession of its eighth GEC® branded rental property
Positive – The company has commenced operations at its eighth property, after receiving an occupancy permit in late May. This facility can accommodate 188 tenants, with potential to generate $3.2M in revenue/year. Our most recent update includes our projections for this project.
Positive – Funds will be used for its upcoming clinical trials.
Weekly Crypto Commentary
Prices of mainstream/popular cryptos were down 6% on average last week (up 4% in the previous week).
Source: FRC/Yahoo Finance
The global MCAP of cryptos is US$1.15T, down 6% MoM, and 7% YoY.
Companies operating in the crypto space are trading at an average EV/R of 7.3x (previously 6.5x).
EV/R of Crypto Companies
Source: S&P Capital IQ/FRC
Source: S&P Capital IQ/FRC
Key sector developments are listed below (mixed):
– The U.S. SEC has launched a lawsuit against Binance and its CEO, for potentially violating securities laws and commingling customer funds with its own funds.
– Binance is cutting 1,600 jobs, or 20% of its workforce.
– Last week, crypto exchange Kraken announced that its customer deposits are up 25%, since major rivals, such as Binance and OKX, suspended operations in Canada earlier this year.
Weekly Cannabis Commentary
Cannabis Industry Performance
Source: FRC/Yahoo Finance
Last week, U.S cannabis stocks underperformed their Canadian peers (-4% vs -5%). U.S stocks had outperformed in the week prior to last.
Canadian cannabis stocks are trading at a 23% discount on average (previously 19%) relative to their U.S. peers.
Source: S&P Capital IQ, FRC
Source: S&P Capital IQ, FRC
Psychedelic Industry Performance
Psychedelic stocks were up 5% on average last week (up 4% in the previous week).
Source: TMX Money, FRC
Disclaimers and Disclosure
The opinions expressed in this report are the true opinions of the analyst(s) about any companies and industries mentioned. Any “forward looking statements” are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts will materialize. Actual results will likely vary. Certain companies mentioned are covered by FRC under an issuer paid model. FRC or companies with related management, and Analysts, may hold shares/securities in some companies mentioned in this report, including HEM. Distribution procedure: our reports are distributed first to our web-based subscribers on the date shown on this report then made available to delayed access users through various other channels for a limited time. To subscribe for real-time access to research, visit https://www.researchfrc.com/website/subscribe for subscription options. This report contains “forward looking” statements. Forward-looking statements regarding the Company, industry, and/or stock’s performance inherently involve risks and uncertainties that could cause actual results to differ from such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company’s products/services in the marketplace; acceptance in the marketplace of the Company’s new product lines/services; competitive factors; new product/service introductions by others; technological changes; dependence on suppliers; systematic market risks and other risks discussed in the Company’s periodic report filings, including interim reports, annual reports, and annual information forms filed with the various securities regulators. By making these forward-looking statements, Fundamental Research Corp. and the analyst/author of this report undertakes no obligation to update these statements for revisions or changes after the date of this report. Fundamental Research Corp DOES NOT MAKE ANY WARRANTIES, EXPRESSED OR IMPLIED, AS TO RESULTS TO BE OBTAINED FROM USING THIS INFORMATION AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OR FITNESS FOR A PARTICULAR USE. ANYONE USING THIS REPORT ASSUMES FULL RESPONSIBILITY FOR WHATEVER RESULTS THEY OBTAIN FROM WHATEVER USE THE INFORMATION WAS PUT TO. ALWAYS TALK TO YOUR FINANCIAL ADVISOR BEFORE YOU INVEST. WHETHER A STOCK SHOULD BE INCLUDED IN A PORTFOLIO DEPENDS ON ONE’S RISK TOLERANCE, OBJECTIVES, SITUATION, RETURN ON OTHER ASSETS, ETC. ONLY YOUR INVESTMENT ADVISOR WHO KNOWS YOUR UNIQUE CIRCUMSTANCES CAN MAKE A PROPER RECOMMENDATION AS TO THE MERIT OF ANY PARTICULAR SECURITY FOR INCLUSION IN YOUR PORTFOLIO. This REPORT is solely for informative purposes and is not a solicitation or an offer to buy or sell any security. It is not intended as being a complete description of the company, industry, securities or developments referred to in the material. Any forecasts contained in this report were independently prepared unless otherwise stated, and HAVE NOT BEEN endorsed by the Management of the company which is the subject of this report. Additional information is available upon request. THIS REPORT IS COPYRIGHT. YOU MAY NOT REDISTRIBUTE THIS REPORT WITHOUT OUR PERMISSION. Please give proper credit, including citing Fundamental Research Corp and/or the analyst, when quoting information from this report. The information contained in this report is intended to be viewed only in jurisdictions where it may be legally viewed and is not intended for use by any person or entity in any jurisdiction where such use would be contrary to local regulations or which would require any registration requirement within such jurisdiction.
Kidoz Inc. (KIDZ.V), Fortune Minerals Limited (FT.TO), Sirios Resources Inc. (SOI.V), Noram Lithium Corp. (NRM.V), Kootenay Silver Inc. (KTN.V), Denarius Metals Corp./ TSXV: DSLV, Blue Sky Uranium Corp./TSXV: BSK, SPC Nickel Corp./ TSXV: SPC, Max Resource Corp./TSXV: MAX, GMV Minerals Inc./TSXV: GMV, Lexaria Bioscience Corp.